While no bank is likely to finance the building of a new coal-fired power station here, Malcolm Turnbull and his ministers have been indicating the government might themselves fund them.
Photograph: Bloomberg/Bloomberg via Getty Images

But, since then, the Turnbull government has been furiously talking up the idea of “clean” coal. And while no bank is likely to finance the building of a new coal-fired power station here, Turnbull and his ministers have been indicating the government might themselves fund them.

There’s been a lot of spin in this debate, so here are some facts.

New coal power stations are not ‘clean’

The term “clean coal” has recently been repurposed by the Turnbull government. Traditionally, it was a marketing term used by the coal industry to refer to coal power stations where the CO2 emissions would be captured and stored.

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But, in recent months, Turnbull and his ministers have been using the term “clean coal” to refer to what are called “ultra supercritical” coal power plants. These plants run at a higher temperature than ordinary coal power stations and reduce emissions by about 25%.

But that is 25% lower than some of the dirtiest power plants around. Ultra supercritical power plants still produce about 740kg of CO2 per MWh – that’s compared with 400kg from efficient gas plants and the zero grams from wind and solar.

The Clean Energy Finance Corporation cannot currently fund coal (but the government could change the rules)

Turnbull ministers have indicated they might use the Clean Energy Finance Corporation to finance new coal power stations. “It’s called the Clean Energy Finance Corporation, not the ‘Renewable Energy Finance Corporation’ – that’s an important distinction,” said the energy and environment minister, Josh Frydenberg, on ABC Radio National on Thursday.

It does seem possible the government could use the CEFC to fund coal but it requires some serious contortions.

The existing CEFC legislation explicitly rules out the funding of carbon capture and storage technology. So without changing the legislation, they would be only be able to fund plants that don’t use that technology.

But the CEFC could only finance a coal power station if it determined it was a “low emissions technology”. However, the act does not directly define what a low emissions technology is. Instead, the board must make guidelines that define the term.

The current guidelines interpret “clean energy technology” as one that produces 50% fewer emissions than the rest of the electricity grid. That seems reasonable and would rule out the funding of any coal power plant.

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In 2015 the national electricity market produced 0.81 tonnes of carbon-dioxide equivalent for each megawatt hour of electricity.

Now, the most advanced coal power stations in the world currently emit about 740kg of carbon dioxide for each megawatt hour of electricity. That’s less than a 10% improvement over the existing electricity grid.

(Advanced versions of the plants, which don’t currently exist, could potentially reach 640kg per MWh, which even then is only a 20% improvement over the existing grid.)

No coal power station will fit within the current definition of “clean energy technology”.

Frydenberg could write a new investment mandate, telling the CEFC that coal technology should be financed. That would probably force the CEFC to change their definition of “clean energy technology” to be consistent with ultra supercritical coal.

So, in effect, the government would need to force the CEFC to change the definition of “clean energy” from one that is 50% better than the existing tech to one that is just 10% or 20% better.

And that’s just compared to Australia’s relatively dirty grid. The most efficient coal power stations are significantly more polluting than the average of electricity generator in other OECD countries, which the International Energy Agency said was 420kg per MWh in 2014.

All that aside, the CEFC would still need to decide that investing in a new coal power plants was a good commercial decision, since they need to make money on their loan. They would also need to find an energy company to build the plant. But, with most energy companies saying coal is a bad bet, it’s hard to see how that could happen.

Tim Buckley from the Institute for Energy Economics and Financial Analysis said the CEFC would likely see the loan as a bad bet.

“The stranded asset risks of investing in new coal-fired power plants are clear to almost all,” Buckley said. “At some point a carbon tax or ETS is inevitable and would need to be priced in.”

Buckley said if that happened, the CEFC could well be stranded with any loan it’s given to coal power stations.

Coal does not bring down the cost of energy

Turnbull said in his National Press Club speech on Wednesday that “it’s security and cost that matter most, not how you deliver it”.

But new coal technology is not cheaper than renewable energy.

The US Energy Information Agency recently compared the cost of energy from various types of coal power plants and renewable energy plants.

They found that ultra supercritical coal power plants were about twice as expensive to build per unit of energy, compared to wind farms, and almost 40% more expensive than solar farms.

Then coal power stations have higher ongoing maintenance costs, as well as significant fuel costs, compared with the wind and solar where the fuel is free.

Dylan McConnell from the Melbourne Energy Institute at the University of Melbourne said if those costs were recovered through energy prices, that would push energy prices up.

Tennant Reed from the Australian Industry Group recently pointed out that wholesale electricity prices that are currently worrying big energy consumers have been sitting at about $75 per MWh. But recent projections by the CSIRO suggest the ultra supercritical coal generators would produce electricity at a cost of about $80 per MWh.

“To build a coal plant with such costs, investors would need to expect wholesale prices to rise even above looming levels and stay there for decades,” Reed wrote.

Reed also pointed out that the $80 per MWh projection was optimistic, since it was assuming that the power plants were being used at about 80% of their capacity, which was much higher than was generally the case.

Meanwhile, new wind and solar will produce electricity at about $75-85/MWh today and that price will decrease in coming years.

Buckley says: “So renewables are already at grid parity or cheaper than new USC coal-fired power, they can be built more modularly and five times faster, they have 100% emissions reduction relative to the PR spin called ‘clean coal’, they conform to our Paris CO2 commitments and they are likely to get finance – unlike a new coal-fired power plant.”